2. We have decided to publish the evidence we received
at the earliest opportunity, together with this short Report,
in the hope that it will help to inform debate in the House and
more widely. We also hope by highlighting a number of issues in
this Report to afford our successor Committee in the next Parliament
an opportunity to produce a more substantial report should it
so wish. In that context, we discuss in later paragraphs the following
matters which in our judgment particularly merit further consideration:

the timetable for and process of enlargement,
including problems caused by delays in the timetable; transitional
arrangements and derogations for candidate countries (with particular
regard to free movement of people, agriculture and the environment);
the treatment of countries which are unlikely to join in the near
future; and relationships across the new external borders of the
EU

the EU's preparedness for enlargement,
including agricultural support; and the budget in the light of
the maintenance of unanimity for the next financial framework

the United Kingdom's preparedness for enlargement,
including the financial costs; levels of diplomatic representation
in the candidate countries; and bilateral assistance to the candidate
countries

the particular problems concerning the candidacies
of Turkey and Cyprus

the allocation of Council votes and of European
Parliament seats after enlargement

the implications of enlargement for the European
Security and Defence Policy and for the Common Foreign and Security
Policy, including the issue of democratic
oversight of these policies

the 2004 Inter-Governmental Conference,
including the organisation of and procedures to be used in preparing
for the IGC; the debate on the future of the EU; the establishment
of a more precise delimitation of competencies between the EU
and Member States; the status of the Charter of Fundamental Rights;
treaty simplification; the role of national parliaments; the power
of the Commission; and the democratic legitimacy and transparency
of the EU

12. Political considerations, however, make a strictly
objective assessment of progress unlikely. The perception that
a candidate country is faring badly in negotiations may affect
its economy adversely.

13. This is a longstanding issue of concern to us,
which we raised in our 1999 Report.[13]
There is a danger that candidate countries which are in a position
to join the EU are held back by other less successful countries
perceived as more important by Member States. Conversely, there
is a threat that candidate countries will be allowed to join the
EU for political reasons before they are fully ready. Germany
is keen for Poland to be among the next group of candidate countries
to join the EU, perhaps regardless of its readinessor the
prior readiness of other candidatesto do so.

14. A second matter of concern was brought into stark
relief by our oral evidence session with Mr Vaz.[14]
Progress towards membership is measured in terms of the number
of chapters of the acquis communautaire[15]
opened and closed for negotiation between a candidate country
and the EU. This numerical approach hides the fact that none of
the candidates has yet resolved the thorniest issues: freedom
of movement for persons, agriculture, competition policy, transport
policy, taxation, environment and budget.[16]
As Mr Vaz admitted, "Cyprus, 17 out of 29, and that sounds
good, but the most difficult ones are to be closed ... we need
to make progress on the difficult chapters."[17]
If these nettles are not grasped in the near future, the danger
is that negotiations will become bogged down at a late stage.
Further, closing the chapters of the acquis is only the
preliminary: a potentially lengthy process of ratification of
each accession must then follow.

15. Timetables for accession have a tendency to slip,
but the current likely date of accession of a first wave of new
Member States2004is drawing close, increasing the
need to look at the transitional arrangements which will be agreed
as part of accession. As we mentioned in our 1999 Report,[18]
there have been particular worries expressedespecially
by Germany, in relation to Polandabout the effect on existing
Member States of an immediate extension to new Member States of
the free movement of labour. In March 2001 the European Commission
produced a policy option paper on the free movement of workers
in the context of enlargement.[19]
A proposed 7-year transition period before workers from Poland
have free access to EU labour markets is the same as that which
applied to Spain, Portugal and Greece when they acceded. Poland,
however, would like to see as short a transition period as possible.
The question of transitional arrangements and derogations is likely
to become more pressing in the course of the next Parliament.

16. Some candidate countries are less likely than
others to join the EU in the near future. It is crucial that these
countries are not forgotten, that the prospect of membership remains
an encouragement to them to carry out the necessary reforms, and
that, while they remain candidates, they are integrated as much
as possible within European structures. Excessive or unjustified
delays could damage the perception of the benefits of accession
among public opinion in the candidate countries.

17. A final issue which stems from the process of
enlargement is the relationship which the EU will have with the
countries adjoining its new external borders. We have raised with
Mr Vaz the issue of Kaliningrad,[20]
which will become a Russian exclave in the EU following the accession
of Poland and Lithuania. Environmental problems and organised
crime in Kaliningrad are problems of particular concern.

19. Another issue which threatens to be a future
problem is the successful Spanish campaign at Nice to preserve
until 2007 unanimity on the allocation of structural and cohesion
funds. One possible implication of this is that the United Kingdom
and other net contributors may well have to bear most of the cost
of enlargement, although this will be subject also to other developments.
The scale of any such increase will depend on the terms of accession
and the capacity of the new Member States to absorb subsidies.
Nonetheless, it would surely be prudent for the Government to
engage now in some forward planning.

21. We raised the issue of diplomatic representation
in our 1999 Report.[26]
In evidence Sir John Kerr, the Permanent Under-Secretary of State
at the Foreign and Commonwealth Office, singled out Central and
Eastern Europe as an area which required the commitment of substantially
increased resources, particularly because ministries in these
countries would, upon enlargement, be assisting those carrying
substantial numbers of votes in the Council.[27]
In its response to our 1999 Report,[28]
the Government promised to continue to commit resources to applicant
countries, including an increase in diplomatic representation.
We recommend that the Foreign and Commonwealth Office urgently
examines whether the Government is committing sufficient resources
to the region and states its conclusions and future plans in its
response to this Report.

23. The Minister for Europe has confirmed that it
remains the Government's view that the situation in Cyprus need
not be a barrier to accession.[32]
However, on seeking some elucidation of how, for example, freedom
of movement across a divided island would work in practice we
were surprised to learn from the Head of EU Department (External),
Mr Simon Featherstone, that "collectively, within the EU,
we have not discussed these hypothetical situations."[33]
Our surprise is all the greater because we understand from the
FCO's written evidence[34]
that the chapter on freedom of movement has been opened in negotiations
with the Cyprus government. Negotiations surely imply discussion.
We recommend that the Foreign and Commonwealth Office takes
the earliest possible steps to open discussions within the EU
on how in practical terms the far from hypothetical problem of
the accession of Cyprus while it is still politically divided
should be overcome.

24. We also pursued with the Minister the question
of whether Turkey has a veto over Cyprus's accession. The Government
has previously accepted our view that neither Turkey nor any other
third party has such a veto,[35]
but when he appeared before us the Minister was unclear about
whether the constitution of the Republic of Cyprus might effectively
prohibit accession unless Turkey was also admitted as a full member.[36]

25. We subsequently received a note from the FCO
which only partly clarifies this point. The provision in question,
Article 50 of the 1960 constitution of Cyprus, is regarded by
the British Government as "inoperative" in the present
circumstances.[37]
What is not clear from the note is whether the other guarantor
powers, Greece and Turkey, as well as the European Commission
and other Member States of the EU, share the British Government's
interpretation of Article 50. We continue to conclude that
Turkey should not have a veto over the accession of Cyprus, and
recommend that the Foreign and Commonwealth Office intensifies
its efforts to secure EU-wide agreement to this position.

26. The position with regard to Turkey's candidacy
has improved since our 1999 Report, but, as the Minister said,
"Turkey has to improve its human rights record. It needs
to do better before it reaches the first stage, it needs to meet
the Copenhagen criteria, and, as far as the justice and home affairs
agenda, it really does need to make that progress."[38]
Other issues involving Turkeyas a member of NATO which
is not a member of the EUare discussed below.[39]

28. We were told by the FCO that "The figures
for the applicant countries are contained in a Declaration annexed
to the Treaty and do not therefore have legal force. They do,
however, represent a political commitment and, as such, will be
a guide for the accession negotiations. Any applicant country
that feels it has been unfairly treated is free to raise the matter
during these negotiations."[44]

29. It appears from this that the aggrieved applicant
countries still have everything to play for. It is therefore too
soon to conclude that this particular area of controversy has
been fully dealt with. We asked whether the Government intends
to take any initiative in this matter.[45]
We recommend that the Government clarifies whether it considers
the number of Council votes and European Parliament seats for
the applicant countries to have been settled finally or not.

31. However, the Treaty does not itself deal with
the related question of the status of the European Security and
Defence Policy (ESDP) vis-à-vis NATO. Instead, this
question is dealt with in a report attached to the Presidency
Conclusions of the European Council (also held in Nice) while
a Declaration annexed to the Final Act of the Conference calls
for the ESDP conclusions of that report to be implemented "as
soon as possible in 2001", i.e., without waiting for ratification
of the Treaty of Nice.[47]
It remains to be seen just how soon differing interpretations
of the report's conclusions can be reconciled, and what the statement
that EU-led military operations will take place only "where
NATO as a whole is not engaged"[48]
will mean in practice.

32. The Minister for Europe reminded us "how
much we depend on NATO, how important it is for our defence policy,
it is the corner-stone of our defence policy, and we will need
NATO to do any of this, we will need their capabilities, we will
need their assets, we will need their operational planning, we
will need all of this, and we cannot do it without them."[49]

33. Among other things, this statement begged the
question, which we duly put to the Minister, whether Turkey's
status as a member of NATO which is not a member of the EU and
its refusal to allow NATO facilities to be used for EU-led military
operations might constitute an obstacle to implementation of the
ESDP. The FCO stated in its memorandum that "Provision of
NATO assets and capabilities for use in an EU-led operation would
require a specific [North Atlantic Council] decision, which would
be by consensus; so each Ally would have a veto."[50]
Mr Vaz, on the other hand, "would not call it a veto ...
It does not stop what we are doing."[51]
The Minister's assertion provides little by way of reassurance.
We recommend that the Department in its Response to this Report
clarifies whether it considers that any single NATO member will
have a veto over the provision of NATO assets and capabilities
for an EU-led military operation.

34. We deal in paragraph 32 below with the problem
of democratic oversight of these policies.

36. The process of "deeper and wider debate"
envisaged by the leaders gathered at Nice could be the convention
process, which is only "one of many possibilities"[54]
and of which the Minister for Europe is "not personally a
great fan",[55]
or it could be something else, such as the second chamber of the
European Parliament which the Prime Minister called for in a speech
in Warsaw last October.[56]
That is for the Swedish and Belgian presidencies to sort out,
but we note that the British Government will be bringing forward
proposals of its own and that Ministers "would be happy to
look at" anything this Committeeor, presumably, its
successormight want to say on preparations for the IGC.[57]

37. The agenda for the IGC will be set only after
discussion of four areas set out in a Declaration annexed to the
Treaty of Nice:[58]

how to establish and monitor a more precise delimitation
of powers between the European Union and the Member States, reflecting
the principle of subsidiarity;

the status of the Charter of Fundamental Rights
of the European Union, proclaimed in Nice, in accordance with
the conclusions of the European Council in Cologne;

a simplification of the Treaties with a view
to making them clearer and better understood without changing
their meaning;

42. The Declaration makes it clear that these issues
are not necessarily the only areas to be discussed in the approach
to the IGC. Two others which might be discussed as part of the
"deeper and wider debate about the future of the EU"
are the powers of the European Commission, and the democratic
transparency and legitimacy of the EU. On the first of these,
we were interested to be told by External Affairs Commissioner
Chris Patten that, far from being all-powerful, "the Commission
run the back office."[60]
We will be even more interested to see whether any of Mr Patten's
colleagues seek to move their operations into the front office
between now and the IGC.

43. The second of these issuesthe democratic
transparency and legitimacy of the EUis perhaps best seen
as the obverse of the first and applies across a range of policy
areas, not least scrutiny of the ESDP and CFSP. National parliaments,
their committees and inter-parliamentary organisations are already
concerned about the lack of democratic accountability. While it
is true that "The Government will be accountable to Parliament
for decisions to deploy UK forces to EU-led operations",[61]
as is also true of NATO operations, such accountability is retrospective.
There is no accountability to the European Parliament, which has
only a consultative role on the main aspects and basic choices
of the CFSP.[62]

44. Enlargement is likely to exacerbate, rather than
improve, this situation and it is crucial that initiatives such
as the Prime Minister's proposal for a second chamber are considered
with all due seriousness as part of the preparations for the IGC.
We hope that as the EU accrues more responsibility for foreign
and defence matters our successor Committee will examine carefully
the problem of parliamentary oversight by other than national
parliaments.